Balance Sheet Ledger Account Reconciliations And Certification
Accounting ManualBalance Sheet Ledger Account Reconciliations and CertificationThis document provides detailed information regarding the expectations and guidelines associated with thereconciliation of the university’s balance sheet ledger accounts.University policy requires that balance sheet ledger accounts be reconciled on a monthly basis. See requirementsat Balance Sheet Ledger Account Reconciliation & Certification (1101 PR.04).Purpose of Balance Sheet Ledger Account ReconciliationThe purpose of a balance sheet ledger account reconciliation is to verify the accuracy, completeness andvalidity of accounts included on Yale University’s Statement of Financial Position (a.k.a. balance sheet) ata given point in time. Full details are in the Procedure linked above.The difference between asset and liability balances recorded in the general ledger and other sources offinancial data are reconciling items. Reconciling items may be caused by timing differences, general ledgererrors (e.g., manual journal entries, sub-ledgers errors) or errors in the other sources of financial data (e.g.,bank errors).A balance sheet ledger account reconciliation is a key control over financial reporting at Yale.Reconciliation ResponsibilitiesUnits are responsible for ensuring that balance sheet ledger accounts for which they are accountable for arereconciled monthly and in a timely manner. See Procedure 1101 PR.04 Section 2. Monthly reconciliations shouldbe completed within 10 days of month-end close.The Controller’s Office maintains record of balance sheet ledger account reconciliation responsibilities forcompliance monitoring. Certain ledger accounts are the responsibility of one department/team. Other ledgeraccounts are the responsibility of various departments/teams based upon the Planning Units and/or Cost Centerswith balances. Account reconciliation responsibilities may be with teams in central university units (ex:Controller’s Office, Shared Services, Procurement) or with department business offices (at the Planning Unit orDepartment level).Principles of Balance Sheet Ledger Account ReconciliationOn a monthly basis, units are responsible for reconciling and reviewing asset and liability balances. The balance tobe reconciled is as of the month end date and as such, considers beginning balance plus/minus activity. If, due tothe nature of the account, a unit believes that an account reconciliation frequency other than monthly isappropriate, an exception must be requested from the Controller’s Office, at controllers.office@yale.edu.Certain ledger accounts are the responsibility of one department/team. Other ledger accounts are theresponsibility of multiple departments/teams based upon the Planning Units and/or Cost Centers; and in somecases, based upon Program. In these instances, the reconciliation should consider other segment values of theChart of Accounts, such as Cost Center and/or Program. Each department/team is individually responsible forreconciling its respective balance. This is consistent with the requirement for review of assets and liabilities foundin the monthly Financial Review Checklist.The reconciliation process involves verifying that ledger account balances in the general ledger as of themonth end date are: complete and accurate account activity is reasonableQuestions: General Accounting – controller.genacct@yale.eduLast updated May 24, 20191
Accounting Manual reconciling items are properly documented and resolved unusual activity is identified aged reconciling items are monitored account balances are supported with appropriate documentationA balance sheet ledger account reconciliation: Provides the general ledger account balance Shows any reconciling items to get to an adjusted general ledger account balance Provides the balance of the sub-ledger or supporting detail Shows any reconciling items to get to an adjusted sub-ledger balance Documents all variances – known and unknown – more detail belowPlease note that the “Detailed Transactions – Yale” report, “Financial Transactions – Yale” report, and other similarreports showing ledger detail do not constitute appropriate sub-ledgers or supporting detail.Preparation of Balance Sheet Ledger Account ReconciliationThe recommended approach to the preparation of a balance sheet ledger account reconciliation is as follows:1. Set-up reconciliation spreadsheet. See template which may be utilized.a. Complete COA information on Tab 1b. Identify financial period covered by the reconciliationc. Complete Tab 1 with supporting detail amounts and descriptiond. Complete Tab 3 to document the account purpose/background, describe the mechanics ofentries, identify the sources of input, as well as the timing and analysis of recording activity, andprovide additional references, as necessarye. Identify the preparer and approver and dates. Signatures are deemed best practice and may beelectronic.f.Tab 2 is provided for additional detail/space, as necessaryg. Attach the reconciliation. Please note that the responsible owners in the Controller’s Office arecurrently exempt from this requirement since a repository has been created where thesereconciliations may be saved.2. Gather documentation to support ending balance sheet ledger account balance. Examples of supportingdocumentation include, but are not limited to:a. Bank statementsb. Executed legal documentsc. Journal entriesd. Sub-ledger system reportse. Approved emailsf.Supplier invoices3. Reconcile supporting documentation to the balance sheet ledger account balance:Questions: General Accounting – controller.genacct@yale.eduLast updated May 24, 20192
Accounting Manuala. Document reasons for any variances between supporting documentation and the balance sheetledger account balance. These variances are called reconciling items and can be considered eitherknown variances and/or unknown variances. It is important that the reconciliation clearlyidentifies the variances as known or unknown. Refer to the template for suggested format andguidance.b. Attach adequate documentation to support the reconciling items.c. Document the expected resolution date for each reconciling item.4. Resolve current period and prior period reconciling items:a. Resolve current period reconciling items. Resolution may include recording or correctingtransactions in a sub-ledger system, Workday, or a bank account. The resolution will depend onthe reason for the variance. Communication and collaboration between departments may benecessary to resolve the reconciling items.b. Update the status of prior period reconciling items.c. Follow-up on aged, unresolved reconciling items as needed.5. Correct balance sheet ledger account activity errors discovered:a. Communicate balance sheet ledger account activity error discovered to the unit responsible forrecording the activity.b. Coordinate the correction of balance sheet ledger account activity errors with the unit responsiblefor the activity.c. Timely correction is important. Efforts should be made not to have corrections cross into a newfiscal year.6. Review the reconciliation and route for approval:a. Verify that reconciliation spreadsheet is complete (see Step 1).b. Verify that all supporting documentation for ending balance and reconciliation items areattached, as necessary (see Step 2 and Step 3).c. Sign and date the reconciliation as preparer.d. Route the reconciliation to the approver.7. Final Approval - Approver signs and dates the reconciliation.Reconciling Items and/or VariancesAn essential element of the ledger account reconciliation process is the identification and resolution ofvariances. Variances must be quantified, aged, investigated and explained, with correcting transactions/entriesrecorded in the sub-ledger, general ledger, bank account, etc. It is important to make every effort possible tonot have corrections cross into a new fiscal year. Variances that can be supported with backup, that result fromtiming differences, general ledger errors, sub-ledger errors, or errors in other sources of financial data,etc. are known variances. Typically, these types of reconciling items will be resolved within 90 days of themonth end date for which the reconciliation is performed. Variances that are either unsupported and/orcannot be resolved in a timely manner may be considered unknown. For unknown variances that remainoutstanding for over 90 days that cannot be resolved please consult with the Controller’s Office.The reconciliation should be maintained by the unit in accordance with Policy 1105: Retention ofUniversity Financial Records.Questions: General Accounting – controller.genacct@yale.eduLast updated May 24, 20193
Accounting ManualUnits are responsible for maintaining department-specific reconciliation procedures and it is recommended thatthe units review these procedures on an annual basis for accuracy and validity.Account CertificationOn a quarterly basis, the Controller’s Office will require ledger account balance certification in accordance withthe Balance Sheet Ledger Account Reconciliation & Certification Procedure (1101 PR.04). This Workday businessprocess will be initiated by Financial Systems & Solutions (FSS) once the period has been closed, and the balancesheet is considered final. However, it is important that the ledger account reconciliation process, as describedabove, is begun in a timely manner so that you are well-prepared when the Workday notification for accountcertification has arrived in your inbox.The purpose of the account certification process is to verify that account owners have reviewed reconciliationsfor all asset and liability ledger account balances under their authority, and, that to the best of their knowledge,they are able to certify that the ledger balances, are in all material respects, complete, accurate, and supportedby appropriate documentation, in accordance with university ledger account reconciliation guidelines. In addition,if differences have been identified through the reconciliation process, the account owners acknowledge that theyare properly reported as a reconciling item or adjustment on the reconciliation, and that any unknown variancereported in the certification will be investigated further with the objective of being resolved in a timely manner.Each ledger account (or ledger account/cost center/program combination) will be assigned one ReconciliationPreparer and one Reconciliation Approver (Note: these are not roles in Workday, but rather individual, manualassignments). The inventory list is used to generate account balance certification sets, which serve as the basis ofthe Workday certification business process. As needed, the Controller’s Office will consult with LeadAdministrators for individual assignments. Units should communicate changes in reconciliation owners (preparerand approver) to General Accounting, Controller’s Office in a timely manner. General Accounting will processthese changes on behalf of units in Workday. The approximate timing for the steps associated with accountcertification is as follows: Account certifications will be kicked off at the time of completion of the month-end close for the quarters;and at the time of the completion of the net balance update following the journal entry deadline for selfsupport schools for fiscal year-end. Account certification approvals must be completed and submitted within 20 days of kick-off for both thequarters and fiscal year-end.For asset and liability ledger account balances as of June 30, 2019, the account certification business process willbe implemented in a phased approach based upon certain quantitative and/or qualitative risk factors. It isexpected that the account certification business process will be fully implemented for all balance sheet ledgeraccounts determined to be in-scope by the Controller’s Office as of December 31, 2019, and on a going-forwardbasis. For detailed instructions, see WD Guide – Account Certification.MonitoringThe Controller’s Office may conduct independent reviews of balance sheet ledger account reconciliations. It isexpected that reconciliations will be completed and provided to the Controller’s Office upon request.Definitions Account Balance (on the Balance Sheet): An account balance in the general ledger which represents anasset, liability, or net asset at a point in time. Account Balance Certification: The workday business process whereby the account owners verify that theyhave reviewed account balance reconciliations under their authority and acknowledge that certain4Questions: General Accounting – controller.genacct@yale.eduLast updated May 24, 2019
Accounting Manualconditions have been met. Refer to the Balance Sheet Ledger Account Reconciliation & CertificationProcedure (1101 PR.04) for further details. Asset: An asset is a resource owned by the university with substantial future economic value. Theuniversity’s assets include, but are not limited to: Cash Accounts receivable Contributions receivable Investments Prepaid expenses Inventory Land, Building and Equipment Chart of Accounts (COA): COA is a set of segments used to classify and record financial transactions inmeaningful ways. The segments provide structure for reporting and monitoring financial activity. See theCOA website for details. Cost Center: A cost center identifies financial responsibility and management for officially acknowledgedbusiness units (departments, sections, etc.). See the COA website for details. General Ledger: The final repository of all financial transactions and balances (i.e., assets, liabilities, netbalance, revenue, and expenses). The general ledger is used to create the financial statements. Workdayis the system that houses the general ledger. Ledger Account: A ledger account is the natural account that makes up the financial statements inWorkday. See the COA website for details. See also “Account Balance” above. Ledger Account Balance Reconciliation: A balance sheet ledger account reconciliation is the comparisonof an asset or liability balance in the general ledger to another source of financial data, such as astatement, a sub-ledger, or another system. Liabilities: A liability is an obligation owed by the university, the settlement of which results in an outflowof resources. The university’s liabilities include, but are not limited to: Accounts payable Accrued expenses Advances Accrued pension and post-retirement benefit obligations Bonds and notes payable Net Assets: The residual assets after deducting liabilities. In other words, net assets equal assetsless liabilities. Program: The program identifies ongoing functional activities at the level of detail required to regularlyanswer questions and provide reports to Deans, Chairs and Directors. See the COA website for details. Reconciling Item: The variance between asset and liability balances recorded in the general ledgerand other sources of financial data are reconciling items. Reconciling items may be caused by timingdifferences, general ledger errors, sub-ledger errors, or errors in other sources of financial dataQuestions: General Accounting – controller.genacct@yale.eduLast updated May 24, 20195
Accounting Manual(bank errors). If the reconciling item can be supported, it is considered a known variance. If thereconciling item cannot be supported, it is considered an unknown variance. Roll-forward: Activity analysis that simply rolls transactions from one month to the next. While serving asa good analytical tool, it is not an acceptable substitute for a properly performed account reconciliation. Statement of Financial Position: The university’s statement of financial position, also known as a balancesheet, is a financial statement that reports the balance of the university’s assets, liabilities, and net assetsat a point in time.Questions: General Accounting – controller.genacct@yale.eduLast updated May 24, 20196
Preparation of Balance Sheet Ledger Account Reconciliation . The recommended approach to the preparation of a balance sheet ledger account reconciliation is as follows: 1. Set-up reconciliation spreadsheet. See template which may be utilized. a. Complete COA information on Tab 1 b. Identify financial period covered by the reconciliation
If Program Number “PG123456” has activity in balance sheet ledger account number 1321 - A/R Other, then you must complete the “Balance Sheet Reconciliation” template, located on the Controller’s website. NOTE: REFER to slide number 15 of this presentation for a list of specific Balance Sheet Ledger Accounts that MUST be reconciled.
General Ledger Account General Ledger Account DocumentsDocuments General Ledger Account Documents FI_GU_310 v10 2 Learning Objectives At the end of this course you should be able to: Explain the general ledger document parking process Create parked general ledger documents (JVs) Know how to display a parked document Know how to display a posted document
Balance Sheet Account Reconciliations A major aspect of auditing involves verifying the accuracy of your balance sheet accounts. The reason is that if your beginning and ending balance sheet accounts are accurate, then net income for the period must be accurate. So, reconcile the balance sheet numbers and, magically, your net income is correct.
Balance Sheet Account Reconciliation - A balance sheet account reconciliation is the comparison of an account’s general ledger balance to a sub ledger balance, bank or other third-party statement, or additional documentation that appropri
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